The German Dax rises 0.8% to 25,553 points and the EuroStoxx50 advances 0.5% to 6,316 points, in a session marked by strong results from Unilever and Mercedes-Benz and the drop in crude oil prices.
European stock markets extended their gains on Tuesday, driven by better-than-expected corporate earnings and the decline in oil prices, which alleviates inflation fears. The German Dax rose 0.8% to 25,553 points, while the EuroStoxx50 climbed 0.5% to 6,316 points.
"Investors are feeling the summit fever again," said Timo Emden, an analyst at Emden Research. "The prospect of new all-time highs fuels hopes for greater profits, although the air is becoming increasingly scarce."
The Brent crude oil barrel, a European benchmark, fell more than 4% during the session to $84.70, while the US West Texas Intermediate (WTI) dropped 3% to $79.80. The decline comes after oil surpassed $100 last week due to tensions in the Middle East.
US President Donald Trump stated on Monday that Washington is having "good conversations" with Iran and that there is a possibility of reaching a solution. "Although maritime traffic through the Strait of Hormuz remains scarce, the market is confident in an improvement in the situation thanks to new talks between Oman and Iran about a new mechanism for the area," explained Giovanni Staunovo, an analyst at UBS.
Goldman Sachs predicts that the price of Brent will fall to $80 by the end of the year if the Strait of Hormuz is fully reopened in the fourth quarter.
Unilever and Mercedes-Benz lead the gains
On the corporate front, Unilever was one of the standout stocks. The consumer goods giant reported quarterly sales growth above expectations and raised its annual forecasts. Its shares soared 7% in London, heading for their largest daily increase in over four years. "These results, much better than expected, should significantly boost market sentiment today," said Callum Elliott, an analyst at Bernstein.
Mercedes-Benz also saw a strong rise, with its shares advancing by up to 5.9% after reporting its earnings. The company exceeded expectations in the second quarter in areas such as the margin of its passenger car division and adjusted free cash flow. "Investor fears have not materialised and the automotive group continues to perform well in a weak market environment," noted Andreas Lipkow, an analyst at CMC Markets.
However, Lipkow warned that the Chinese market remains a drag on German manufacturers. "The main market, China, continues to be the big problem for German manufacturers, which is why the Stuttgart firm is also being more cautious in its sales forecasts," he added.
Pressure on European chip manufacturers
On the negative side, semiconductor sector stocks suffered significant declines. ASM International, ASML, and BE Semiconductor dropped between 2.4% and nearly 4% in Amsterdam, while Aixtron and Siltronic fell around 6% and 7% in Frankfurt. Fears of increasing Chinese competition triggered the sell-off.
According to an internal source, a little-known Chinese state-owned company has begun producing lithography machines, necessary for chip manufacturing. The portal The Information also reported on advancements in chip machinery development in China. "China will soon supply the world with high-quality memory chips at lower prices," said Fan Liwen, a portfolio manager at Shenzhen New Thinking Investment Management.
The pressure was also felt in Asia, where stock markets in South Korea and Japan recorded significant losses. Nvidia, the US chip manufacturer, also faced cuts. Investors are concerned about both the funding of artificial intelligence infrastructure and China's technological advancements.
For European investors, the session leaves a bittersweet taste. While traditional sectors such as consumer goods and automotive drive the market, technology is suffering. The key will be whether the truce in oil and strong corporate results can sustain optimism in the coming days.
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